To Our Shareholders and Investors

We are deeply grateful for your special support.
SDS Biotech K.K. now embarks on a new phase in its history.

SDS Biotech K.K. became an independent company when it separated from its former parent company, Showa Denko K.K., by way of a management buyout (MBO) in cooperation with the fund in March 2005. Since then, we have worked on reinforcing the management base. As a result, we were listed on the Japanese Jasdaq Securities Exchange (current Jasdaq Market of the Osaka Stock Exchange) in December 2008 and the Second Section of the Tokyo Stock Exchange in December 2009. In addition, the largest stockholder of SDS Biotech K.K. changed from the fund to Idemitsu Kosan Co., Ltd. in June 2011 when a takeover bid (TOB) was made for us. This marked the end of the stage of our journey after the MBO. In the days and months ahead, in order to contribute towards further growth, we will write a new page in our history by pursuing synergy with our new parent company, Idemitsu Kosan Co., Ltd. As a company, we will do this while intending to shake up the status quo within our industry.

In the agricultural chemicals market, the phase of inventory adjustment in the previous year came to an end at home and abroad, and it got things off to a good start in 2011. However, in Japan, there are concerns about the effects of the Great East Japan Earthquake that occurred on March 11.

Under these circumstances, we at SDS Biotech K.K. expect a decrease in profit due to a price cut in our chlorothalonil products for Europe and North America as a countermeasure to generic products that are experiencing intensifying competition; as well as the effect of competing paddy herbicides in Japan.

The financial results for the second quarter that we have already announced exceeded the initial projection thanks to a better-than-expected shipment of microbicides to overseas destinations, including Asia. The full-year earnings forecast continues to remain uncertain amid the adverse situation with concerns about an ongoing strong yen, concerns about further pressure to cut prices triggered by competition with generic products in the overseas market, the effects of the Great East Japan Earthquake and revision of prices of materials based on the trend of crude oil prices. Nevertheless, we are certain that we can achieve the full-year earnings forecast by continuing to work on cost reductions and other measures.

In the days ahead, we will make active efforts to solve issues step by step. For example, we will enhance our lineup of products and expand overseas operations to grow again. In particular, we will work on ensuring safe food with our unique product development based on a combination of the technology of chemical pesticides, our specialty, and the technology of microbial pesticides, the specialty of Idemitsu Kosan, our new parent company.

We will make a concerted effort as a company to further expand operations and become a company that meets expectations and trust of all the stakeholders, while keenly aware of our responsibilities as a publicly traded company.

We are pleased to present this message to you, and we ask for your continued guidance and support in our endeavors.